Morningstar Catalog 2010/2011 - (Page 26)
Recent Research Initiatives to Improve the Investor Experience
In addition to our analyst teams, Morningstar has a group of researchers who explore ideas that often emerge in our products. These are a few of their recent projects. Expand our global view. As the investing world offers more opportunities, we’re searching for ways to examine different investments from different regions through a similar lens. Those efforts have produced Global Categories, a new classification that allows investors to make meaningful comparisons between + investments across the globe by grouping funds with similar investing styles. Rankings will soon be available using this global classification. Build on academic research. Our researchers also monitor what academics are studying in search of relevant advances. One example is Active Share, a new measure of + active portfolio management developed by Yale School of Management professors K.J. Martijn Cremers and Antti Petajisto. The professors found that U.S. equity funds with the highest Active Share significantly outperform their benchmarks, while non-index funds with the lowest Active Share underperform their benchmarks. We’ve added this metric to Morningstar Direct, our institutional research platform, and will soon make it available in other Morningstar products.
Morningstar Corporate Credit Research Objective corporate debt research and ratings.
Morningstar now offers credit ratings and analysis for more than 600 companies worldwide, with plans to expand our coverage to 700 by the end of 2010. An extension of the equity analysis we’ve provided for more than 10 years, our credit research grew from a similar focus on a company’s competitive advantages, reflected in the Morningstar® Economic Moat Rating.
We’ve created a transparent framework for our credit ratings built from four quantitative and qualitative metrics—Business Risk, Morningstar® Cash Flow Cushion, Morningstar® Solvency Score, and Distance to Default. The first two are qualitative and depend on the analyst’s business forecast. The latter two are primarily quantitative. The Solvency Score is based on a company’s financial ratios. Distance to Default is a market-driven measure of financial health and distress.
Institutional clients can access companylevel reports with detailed debt analysis through our web portal, along with interactive cash flow models featuring five-year forecasts of leverage, coverage, and liquidity ratios. Direct interactions with our credit analysts allow institutional clients to explore new investment ideas or get second opinions. Clients also receive our Credit Research Weekly newsletter featuring bond ideas, industry news, and commentary on issues. Advisors can build recommendations for clients around our credit research reports and bond picks. And individual investors can view Morningstar Corporate Credit Ratings on Morningstar.com® to learn about a company’s stability.
Read about our credit rating methodology global.morningstar.com/CreditResearch
Morningstar Corporate Credit Ratings
Steps in the Rating Process
Results Economic Moat Rating
Competitive Analysis Cash Flow Forecasts Scenario Analysis Quantitative Checks Rating Committee
Analysts research a company and its industry, including management and customer interviews. Analysts consider ﬁnancial statements and competitive dynamics to forecast the company’s future free cash ﬂows. Analysts model bull and bear cases to derive alternate estimates of enterprise value. Analysts apply quantitative tools built on our backtesting and academic research to gauge a company’s health. Senior Morningstar personnel review the analyst’s modeling assumptions and assessment of the company.
August 30, 2010
Cash Flow Cushion
Enhance our methodologies. Morningstar methodologies often grow from ideas proposed by our researchers, such as the methodology for holdings-based performance attribution analysis in Morningstar Direct. Now our research group will make their own monthly attribution calculations available to a broader audience of advisors and investors through select Morningstar products, initially for open-end equity funds in the United States.
Solvency Score and Distance to Default Morningstar® Corporate Credit RatingTM
Morningstar Credit Research Weekly
Issuer News and Notes
Morningstar Corporate Credit Rating
3M Company MMM (NYSE)
Business Risk Cash Flow Cushion™
Distance To Default
Read about our researchers’ latest work global.morningstar.com/ResearchInitiatives
Bidding war for 3Par heats up. Credit markets overview: Bad news is good news again.
Highlighted Issuer Morningstar Credit Committee firstname.lastname@example.org This week we take a closer look at McKesson (ticker: MCK, rating: A).
Issuer News and 3M will likely enjoy top-line gains due Notes to its sizeable emerging market exposure. Highlighted Issuer
Credit- Perspective 26 May 2010 Past Highlighted Issuers
- McKesson MCK
Cash Flow Model
McKesson boasts a large cash position, manageable debt leverage, and Committee members voting on rating do not own securities issued a Research Weekly Newsletter business Credit solid competitive position in the attractive drug-distribution by the company. Credit Report
Credit May 2010 While we think McKesson may redeploy some cash Analysis as of 26 26 May 2010 in for acquisitions Business Analysis as of Estimates as the future, we don't worry that it will take on egregious of 28 Jul 2010 debt levels, and given the higher yields being offered to McKesson debtholders compared Currency amounts expressed with “$” are in U.S. dollars (USD) unless otherwise denoted. with other A rated credits, we think investors are being amply compensated for this risk.
With a Cash Flow Cushion ratio that rests comfortably of 1 in each of the next ﬁve years, 3M should have Credit Ratings 11 - meeting its contractual commitments with trouble Rating Initiations - Coverage by Sectorcash balance. Moreover generation and its current - Coverage by Rating debt/earnings before interest, taxes, depreciation - Rating Definitions amortization stood at a manageable multiple of 1 at th of 2009, and a strongBond position--about 13% of s Morningstar cash Indexes 27 - Index Performance mitigates the impact of inherent cyclicality in many o - Index Composition end markets.
Credit Contacts 31 Net debt/capital now stands at 15%, up slightly from 2
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Morningstar Catalog 2010/2011
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Morningstar Catalog 2010/2011